2.6: Silver and the Ming Dynasty

Silver in Ming China

The voyages of Zheng He did end up having an unintended consequence whose impact would be global. At the time of the voyages, Chinese dynasties had been employing paper currency since the 11th century. During the time of Mongol rule the practice had been continued and the Ming Dynasty had initially followed suit as well. The earlier systems had backed paper currency with grain (meaning you could exchange, or “convert”, your paper for its value in grain), but during the Ming, money was not backed and was not convertible. The building and maintenance of the treasure fleet was a breaking point for paper currency. To meet the costs of shipbuilding and supply the state printed far too much money leading it to tank in value. By the mid-15th century, just as the voyages were ending, increasing numbers of merchants were refusing to accept paper in return for their goods. In place of paper, a more informal system of barter emerged with sellers and buyers determining what constituted fair value. Localities tended to develop their own mediums of exchange so that in some places it could be bolts of silk, in others grain, and some areas even began minting their own copper coins. Without a clear long-term plan, the Ming began slowly and sporadically introducing a new system in which copper coins would be minted for everyday purchases while large purchases would be made with silver. Along with this, emerged a new tax policy. Instead of taxing each local area in grain and labor, the Ming gradually began requesting tax payments in silver. This began as early as 1436 and then began more formalized over the next century and a half. By the second half of the 16th century, a new norm had emerged by which taxes were paid in silver which the state then used to pay for the costs of administering the empire.

One of the reasons that the system took so long to implement is because the supply of silver was not great enough to keep up with the huge demand that would come from requiring all 120 million subjects of the Ming to pay taxes in silver. This challenge was gradually resolved by enormous increases in the global silver supply. Japan was a major supplier for the first half of the 16th century, but it was mined in Spanish America which would become the key source of silver for the Ming economy by the end of the century. The huge demand for silver in China meant that its value was also extremely high there. From the late 16th century the exchange rate of gold to silver was between 1:5.5 to 1:7 while at the same time in Spain, the rate was 1:12 to 1:14. Because silver was twice as valuable in China it created a huge incentive for anyone who had silver to do their best to get it to China. Through most of the 17th century, 150 tons of silver a year passed from the Americas through Europe and into Asia. Maybe even more significantly, 128 tons a year crossed the Pacific from Acapulco to the Spanish colony of Manila in the Philippines (Figure 2.6.1) where Chinese merchants waited to exchange their silks and porcelains for American silver. The Chinese economy had become like a vacuum cleaner sucking up huge quantities of the global silver supply. According to Flynn and Giraldez, the founding of Manila in 1571 marked the beginning of a truly global trading system. For the first time, all the major populated continents were linked through “substantial, direct, and continuous trade.” (Flynn and Giraldez, 201)

Figure \(\PageIndex{5}\): "View of Manila, 1665," Johannes Vingboons, in the Public Domain

It is worth remembering that within this new global trade, the most important components were Chinese demand and American supply. The high price of silver in China drove the Spanish to exploit their Andean and Mexican mines for all they were worth, to develop complex systems to provide those mines with labor, and to establish a colony in the Philippines nearly 9,000 miles away from its port in Acapulco to access the Chinese market. The result was that the Ming Dynasty got its silver and Spain, which was otherwise a relatively small underdeveloped kingdom, became for a time the great European world power. The flip side of this is that when the price of silver in China began to reach an equilibrium with the rest of the world, Spanish mining profits dried up, its ability to support its ambitions fell, and its status as a world power declined nearly as fast as it had risen. For its part, the Ming Dynasty also suffered as a result of fluctuations in silver prices. With silver losing about ⅔ of its value by the 1630’s it was as if Ming revenue had shrunk by a similar amount. This created a fiscal crisis that was ultimately one of the contributing causes of the fall of the Ming and the emergence of the Qing Dynasty after 1644. In this globalizing world, it was increasingly possible for conditions on one side of the world to dramatically impact people’s lives on the other.

Review Questions

• How did the Ming Treasure fleets destabilize the Chinese monetary system?
• Why was silver so crucial to the emergence of a global economy?